Monitoring Greenhouse Gas Emissions in Russia:A Foundation for Climate Accountability

December 1999

Pacific Northwest National Laboratory

AdvancedInternationalStudiesUnit

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This report was prepared as an account of work sponsored by an agency of the UnitedStates Government. Neither the United States Government nor any agency thereof, norBattelle Memorial Institute, nor any of their employees, makes any warranty, expressor implied, or assumes any legal liability or responsibility for the accuracy,completeness, or usefulness of any information, apparatus, product, or processdisclosed, or represents that its use would not infringe privately owned rights.Reference herein to any specific commercial product, process, or service by trade name,trademark, manufacturer, or otherwise does not necessarily constitute or imply itsendorsement, recommendation, or favoring by the United States Government or anyagency thereof, or Battelle Memorial Institute. The views and opinions of authorsexpressed herein do not necessarily state or reflect those of the United States Governmentor any agency thereof.

PACIFIC NORTHWEST NATIONAL LABORATORYoperated byBATTELLE

for theUNITED STATES DEPARTMENT OF ENERGY

under Contract DE-AC06-76RLO 1830

PNNL-13079

Monitoring Greenhouse Gas Emissions in Russia:A Foundation for Climate Accountability

Prepared with support from the U.S. Department of EnergyOffice of Energy Efficiency and Renewable Energy

Ilya Popov

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FOREWORD AND ACKNOWLEDGMENTS

International cooperation to mitigate greenhouse gas emissions requires rigorous methodsof emission monitoring. This report addresses the situation with respect to monitoring inRussia, the world’s third largest source of greenhouse gas emissions from fossil fuelproduction and use. And as a consequence of its transition from a planned to a marketeconomy, emission monitoring represents a special challenge in that country.

We are fortunate to host the Russian scholar Ilya Popov as a visiting fellow at theAdvanced International Studies Unit of Battelle to help us better understand Russianclimate issues. We are grateful to Brian O’Neill of Brown University, where Popov iscompleting graduate study in environmental policy, for the opportunity to work with Ilya.We are also grateful to the many Russian and American experts who shared theirknowledge about greenhouse gas monitoring and climate change mitigation policies andprovided useful suggestions on earlier drafts. In particular, we would like to thank AlexeyKokorin, Evgeniy Dedikov, Lydia Popova, Bill Irving, Paul Gunning, Reid Harvey, TerryKeating, Virginia Gorsevsky, and Jeremy Schreifels.

Finally, we thank Pacific Northwest National Laboratory reviewers and editors MeredyddEvans, Susan Legro, Elizabeth Malone, Denice Carrothers, and Tom Secrest for theirreviews and editorial suggestions.

William ChandlerDirector, AISUWashington, D.C.

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TABLE OF CONTENTS

FOREWORD AND ACKNOWLEDGMENTS.................................................... v

ACRONYMS ...................................................................................................viii

EXECUTIVE SUMMARY.................................................................................. 1

INTRODUCTION............................................................................................... 3

Russian commitments under the climate change treaties ................................... 3

Monitoring systems for JI projects and emission trading programs.................... 4

Monitoring the steel and natural gas sectors...................................................... 6

Requirements for a monitoring system.............................................................. 7

RUSSIAN MONITORING SYSTEMS ............................................................... 8

Unified State System for Environmental Monitoring......................................... 8

Environmental statistics collection.................................................................... 9

Gazprom Industrial Monitoring System .......................................................... 10

INTERNATIONAL EXPERIENCE WITH MONITORING ............................. 12

The IPCC guidelines....................................................................................... 13

EPA's Guidelines for Monitoring, Evaluation, Reporting, Verification and

Certification of Energy-Efficiency Projects for Climate Change Mitigation .... 16

Voluntary Agreements in Europe.................................................................... 18

EPA’s Acid Rain Program .............................................................................. 19

EPA/Gas Research Institute Study .................................................................. 22

POLICY RECOMMENDATIONS.................................................................... 25

CONCLUSIONS............................................................................................... 28

REFERENCES.................................................................................................. 30

ADDITIONAL BIBLIOGRAPHY .................................................................... 32

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ACRONYMS

AAU assigned amount unitsATS allowance tracking systemCDM Clean Development MechanismDOE U.S. Department of EnergyEPA U.S. Environmental Protection AgencyEU European UnionFCCC United Nations Framework Convention on Climate ChangeGazprom Joint Stock Company “Gazprom”GEF Global Environmental FacilityGHG greenhouse gasGoscomecologia Russian State Committee on Environmental ProtectionGoscomstat Russian State Committee on StatisticsGRI U.S. Gas Research InstituteHydromet Russian Federal Service for Hydrometeorogy and

Environmental MonitoringIMS industrial monitoring systemIPCC Intergovernmental Panel on Climate ChangeIPMVP International Performance Measurement and Verification

ProtocolJI joint implementationUSSEM Unified State System for Environmental MonitoringURF unified reporting formatUSIJI U.S. Initiative on Joint ImplementationPJ petajoulesCH4 methaneCO carbon monoxideCO2 carbon dioxideHF hydrofluoridesH2S hydrogen sulfidesNOx nitrogen oxidesOx oxidantsSO2 sulfur dioxide

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EXECUTIVE SUMMARY

Russia ratified the United Nations Framework Convention on Climate Change (FCCC) in1994. Under the FCCC, Russia must create “national inventories of anthropogenicemissions by sources and removals by sinks of all greenhouse gases not controlled by theMontreal Protocol” (UNFCCC Article 4 1992). If Russia does not fulfill this requirement,it will not be able to comply with the FCCC, nor will it be able to participate in anyflexible mechanisms for mitigation that may emerge. The Kyoto Protocol – which Russiasigned but has not yet ratified – also requires the creation of a national system to estimateemissions (Kyoto Protocol Article 5 1997) and report information about emission to theFCCC Secretariat (Kyoto Protocol Article 7 1997). The Kyoto Protocol establishesseveral flexible mechanisms − the Clean Development Mechanism (CDM), JointImplementation (JI) and international emission trading − which require careful estimationof emissions. Final rules and guidelines for implementing flexible mechanisms are yet tobe defined. If the Kyoto Protocol is ratified, flexible mechanisms will actually allow thetransfer of credits. In this case, some experts think that countries that want to participatein international emission trading and use credits to offset their emissions must be incompliance with Articles 5 and 7 of the Kyoto Protocol.1 Participation in JI will probablynot require compliance for a party that hosts a project but might require compliance foran investing party.2 JI projects will involve careful estimation of emission reductionsresulting from projects. This paper summarizes how Russia can meet these obligations ina practical and cost-effective way.

First, the paper identifies the basic requirements for a Russian greenhouse gas (GHG)monitoring3 system. The most important of these are transparency, verification of resultsby independent parties, standardized data reporting, and relative cost-effectiveness.

The paper then describes existing monitoring systems in Russia and discusses how theycan be extended to include GHGs. Russia could benefit from features of existinginventories and monitoring systems in other countries, and the paper presents thefollowing five examples:

1. The Intergovernmental Panel on Climate Change (IPCC) guidelines to createinventories.

2. U.S. Environmental Protection Agency’s (EPA) guidelines for monitoring JointImplementation (JI) projects.

1 Jeremy Schreifels, EPA, Acid Rain Division − International Climate Change Branch, October 5,

1999. Personal communication.2 ibid.3 In a case of GHGs we can define monitoring not only as measuring actual emissions but also

calculating emissions from fossil fuel consumption or any other relevant data.

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3. Voluntary agreements to increase energy efficiency and decrease emissions inEurope.

4. EPA’s Acid Rain Program.

5. EPA/Gas Research Institute (GRI) study of methane emissions from natural gassystems.

The paper then identifies the most useful and feasible features for Russia in each of thesesystems.

The review of the existing systems leads to several important policy recommendations.First, Russia should create sectoral inventories and use the IPCC guidelines to the extentpossible. It is important to start with the simplest methods suggested in the guidelines.This approach will provide an initial picture of sectoral emissions. More rigorousmethods can then be implemented in the future. However, even simple methods requirethe collection of good data at the facility level. Therefore, Russia should begin withsectors where data are easier to collect. Improved coordination among the local branchesof federal ministries will be essential to better data collection.

In addition, Russia should increase the transparency of its existing monitoring systemsand inventories. Reporting emissions in a standardized format and making all of the dataavailable in one location will increase transparency substantially. Finally, independentreviewers should verify the monitoring results. This approach will increase the credibilityof any future monitoring system in Russia.

The paper uses examples from two sectors of the Russian economy – steel and naturalgas – to analyze monitoring issues. These sectors were selected because they cover alarge share of Russian emissions and will allow Russia to test different monitoringdesigns. In addition both sectors have financial incentives for monitoring. Two futurepapers will describe these sectors in greater detail.

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INTRODUCTION

The Kyoto Protocol, which was signed in 1997 during the third Conference of the Parties,requires developed countries to reduce or stabilize their GHG emissions during the firstbudget period (2008-2012), using 1990 as the baseline year.4 The Protocol establishesseveral mechanisms for reducing GHG emissions that allow countries to reduceemissions jointly. These mechanisms are Joint Implementation (JI), a combined target fortwo or more countries (bubbling), the Clean Development Mechanism (CDM) andinternational emission trading. JI and CDM are project-based mechanisms that allow onecountry to implement an emission reduction project in another country and then count thereductions against its own domestic commitments. Bubbling and international emissiontrading work with total emission limits and do not necessary involve bilateral emissionreduction projects.5 They are also called flexible mechanisms because they allowcountries to choose the most efficient ways of meeting their commitments. The CDM andinternational emission trading are new mechanisms6, while the concept of JI wasintroduced in 1995 at the first Conference of the Parties. JI emerged from the FCCCrequirement, which states that developed countries take the lead in mitigating climatechange while allowing them to do this jointly with developing countries. The FCCC alsorequires developed countries to provide financial and technical assistance to developingcountries. The FCCC established a pilot phase of JI, which does not allow countries totransfer credits. If the Kyoto Protocol enters into force, flexible mechanisms will allowcountries to actually transfer credits.

Russian commitments under the climate change treatiesRussia must complete two tasks in order to meet its commitments under the FCCC. First,Russia needs to know how much it is emitting overall in order to meet its internationalcommitments. Under the FCCC, Russia must regularly update national inventories ofGHG emissions by sources and removals and submit this information to the FCCCSecretariat (UNFCCC Article 4 1992). The Kyoto Protocol − which Russia has signedbut not yet ratified − also requires the creation of a national system to estimate emissionsno later than one year before the first budget period (Kyoto Protocol Article 5 1997).Inventories must be created in accordance with guidelines established by the IPCC.Creating thorough inventories in different sectors will help Russia to set baselines fordomestic or international emission trading programs. In addition, Russia must create asystem to monitor GHG emissions from individual sources because the flexible

4 Countries with economies in transition might choose a baseline year different from 1990.5 Jeremy Schreifels, EPA, Acid Rain Division − International Climate Change Branch, October 5,

1999. Personal communication.6 The concept of the CDM is the same as JI. The only difference between them is that projects

undertaken in non-Annex I countries are considered CDM while JI projects occur between Annex Icountries. The distinction between CDM and JI was made during the third Conference of the Parties. Manycurrent pilot JI projects may be considered as CDM projects because they are between an Annex I and anon-Annex I countries.

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mechanisms in the Kyoto Protocol require monitoring. JI project sponsors must provethat their projects have actually reduced emissions (Kyoto Protocol Article 6 1997). Inthe case of emission trading, it is possible, that parties will not have to prove reductionshave occurred before they can trade Assigned Amount Units (AAUs). Because emissiontrading is based on a country baseline, a country may trade any extra AAUs that it doesnot think it needs. If it trades too many it may be out of compliance and will likely sufferpenalties to be determined by the Conference of the Parties.7

Finally, the existence of thorough inventories and a reliable monitoring system in Russiawill be important for global climate change mitigation efforts. Russian emissions havedropped substantially over the past several years, and Russia has the potential to be thesingle biggest seller in a future world market. If Russia is not able to estimate itsemissions, it may end up selling emissions that have not been actually reduced. This willhave negative consequences for climate change mitigation and undermine trust to thenegotiations process.

Taking these requirements into account, Russia has two primary responsibilities. First, itneeds to build emission inventories for different sectors and create a GHG monitoringsystem. It makes sense to do these tasks simultaneously because they have many commonfeatures. Inventories measure emissions directly or define emission or activity factorswhen direct measurement is not possible. For example, Russia should measure methaneemissions from natural gas systems, where the range of uncertainty is high and defaultemission factors are not well defined. Emission monitoring also involves some of thesame techniques used to create inventories. In many cases, especially for carbon dioxide(CO2) emissions, it would be too difficult or time-consuming to measure emissions, so itis easier to calculate them indirectly. In the industrial sector, such as the steel industry,there are many emission sources. It would be too expensive to measure all of them withCO2 monitors. Energy efficiency projects aimed at reducing CO2 emissions insteadestimate the energy saved as a result of project implementation and then calculateemission reductions using emission factors recommended by the IPCC.

Monitoring systems for JI projects and emission trading programsMonitoring systems for JI projects and emission trading programs will be very different.JI project monitoring must verify that emission reductions are in addition to what mighthappen without a project8, which requires substantial monitoring at the facility level or inone component of a sector (such as pipelines in the natural gas sector) before and after aproject. This process requires a project baseline that considers what would happenwithout the project. Monitoring may be done by project participants, and verificationshould be done by a third party.

7 Jeremy Schreifels, EPA, Acid Rain Division - International Climate Change Branch, October 5,1999. Personal communication.

8 This concept is called “additionality”. Project participants should prove that emission reductionsfrom the project will be larger than those that would occur without the project. Because additionality is notvery well defined it causes a lot of debates between climate change experts.

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In international emission trading programs, it will only be necessary to prove that currentcountry-wide emissions are lower than a given baseline level by a certain amount.Liability issues arise when a seller of emission reduction credits has total emissionsgreater than those allowed by the Kyoto Protocol. Assignment of liability for non-compliance will be defined in international negotiations on the rules for flexiblemechanisms. Several options exist for assigning liability, including buyer and sellerliability. In the case of buyer liability for a country buying emissions, it will be enough ifthe country selling emissions is able to prove that this reduction has occurred. In thissituation, the availability of thorough sectoral inventories might suffice. If a buyerpurchases emission reductions that have not actually occurred and by the end of acommitment period is out of compliance, the buyer will be responsible for having moreemissions than allowances, not the seller. It will be important for the buyer to be sure thatactual emission reductions are purchased. Seller liability suggests that the seller isresponsible for emission reductions sold and it is in the seller’s interest to estimateemissions thoroughly. Otherwise, the seller pays the fines. For a more comprehensivediscussion on liability issues, an interested reader may refer to (Tietenberg et al. 1999)and (Baron 1999).

A country that plans to sell emissions for credits may decide to distribute its emissioncredits among sectors or regions, depending on what kind of emission trading system isused.9 Another possibility is that the Russian Government could keep all credits. In thiscase it is very possible that neither regions nor industrial sectors will have any incentiveto participate in emission trading programs. Distribution of credits among regions orindustrial facilities can lead to further emission reductions and bring more money toRussia. This money could go into new emission reduction projects. Credits mayeventually be distributed among facilities, which would require monitoring at the sitelevel. Monitoring may be done by a facility, but a third party should verify results. Thistype of system might work in the steel sector. An advantage of the steel sector formonitoring is that there are not many steel manufacturers in Russia. It would be relativelyeasy to cover all of them or a subset of the largest emitters. Under this arrangement,techniques used in monitoring JI projects will be valuable for emission trading programsat the sectoral level. In the gas sector, it will be easier to allocate emission credits, asthere is only one company with only several regional branches. Monitoring in this casewill involve measuring emissions from a segment, which belong to a regional company.Local Gazprom branches can take these measurements.

9 A concept of international emission trading is widely discussed by both international and Russian

experts and policy makers. Since a detailed description of emission trading is outside of the scope of thepaper, an interested reader may refer to following documents: Ministry for Fuel and Energy of the RussianFederation 1998; Bureau of Economic Analysis 1998; Center for Clean Air Policy 1998; Joshua et al 1998.

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Monitoring the steel and natural gas sectorsThis paper uses examples from two sectors of the Russian economy – steel and naturalgas – to analyze monitoring issues. Two papers, which analyze these two sectorsexclusively, will be prepared in the future. These sectors were selected for three reasons:

1. They cover a large share of Russian emissions. The natural gas sector produces 60%of anthropogenic methane emissions (Russian Federal Service for Hydrometereologyand Environmental Monitoring 1997). While detailed information about emissionsfrom the steel sector is not available, this sector is one of the biggest industrial energyconsumers, and probably the main source of industrial CO2 emissions from fossil fuelcombustion.

2. They will allow Russia to test different monitoring designs. Each industry hasdifferent gases that are most important.10 Monitoring methane emissions from thenatural gas sector will involve many measurements, while monitoring CO2 emissionsin the steel sector will be calculated from fuel mix data. When better and cheapertechnologies for GHG monitoring are designed, direct CO2 measurement may bepossible. In addition, in each sector the organization responsible for monitoring willvary. The natural gas sector is owned by Gazprom, a state monopoly that will beresponsible for monitoring. Metallurgical facilities, on the other hand, have beenprivatized for the most part. They will conduct monitoring, while regulatory agencieswill aggregate and verify the data.

3. Both sectors have financial incentives to monitor. The steel sector in Russia isinefficient and energy intensive. It holds great potential to improve energy use andreduce corresponding GHG emissions. In the gas sector, reductions in methaneemissions will result from reductions in natural gas losses, which will provideGazprom with more natural gas to sell.

There are many differences between monitoring in the steel and gas sectors. The steelsector primarily produces CO2 emissions. Currently, CO2 emissions in the steel sector areestimated by calculating energy consumption, secondary heat consumption, and fuel mixat individual plants for all processes involving fuel combustion. Accounting for cokeused in the process is also important. Energy consumption is then multiplied by emissionfactors. The gas sector mainly produces methane emissions. Methane emissions are oftenmeasured directly. Because the gas sector is widely distributed geographically and manysources of methane are difficult to measure, monitoring involves many extrapolationtechniques, and the level of uncertainty is higher than that for other GHG estimates.

10 The paper considers emissions only from the natural gas sector, which is defined as production,

transmission and distribution. Besides methane emissions the sectors also produces CO2 emissions, mainlyfrom combustion of gas at compressor stations, but their share is relatively small. Burning natural gas byindustries and power plants produces CO2 emissions but their monitoring is out of scope of the paper.

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Requirements for a monitoring systemRegardless of its ultimate purpose in meeting climate obligations, an effective monitoringsystem should include several features:

1. The ability to monitor emissions continuously or at least over regular periods of time;

2. The ability to estimate uncertainties in measuring or calculating emissions;

3. Electronic collection and exchange of data;

4. Regular reporting in a standardized, internationally accepted format;

5. Verification of results by an independent reviewer;

6. Transparency of data and availability of results to all interested parties;

7. Measures to prevent non-compliance; and

8. Relatively low costs in design and implementation.

Cost-effectiveness, transparency, verification, regular and clear reporting, and publicavailability of information are all particularly important for Russia. To create a systemquickly, Russia should draw upon existing experience in other countries and decide whatmight be useful and feasible for a future monitoring system in Russia. It is also possibleto use Russian experiences in monitoring other substances and the existing capabilities ofagencies that currently conduct monitoring.

The following section provides information about current Russian monitoring systems.The subsequent section provides information about existing systems in other countriesand discusses how their features might be applied in Russia.

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RUSSIAN MONITORING SYSTEMS

Unified State System for Environmental MonitoringSeveral agencies are responsible for conducting monitoring in Russia. The RussianFederal Service for Hydrometeorology and Monitoring (Hydromet) is responsible formonitoring atmospheric, water and soil pollution. The State Service for Monitoring andControl of the Environment was created to conduct this monitoring in 1970. It is ahierarchical structure with several levels. At the local level, monitoring stations conductmonitoring and collect initial data. At the regional level, centers collect, process andanalyze data from stations. They are also responsible for publishing information about thestate of the environment in the regions. At the federal level, Hydromet aggregates datafrom regions and analyzes information on the national level and publishes regular reportsabout the state of the Russian environment as a whole. The State Service for Monitoringand Control of the Environment also includes the State Network for MonitoringAtmospheric Pollution in the cities. This network includes not only Hydromet monitoringstations but also monitoring stations that belong to other agencies and the largestindustrial facilities in a city. It is a common practice in Russia that the biggest polluter ina city regularly measures pollution in residential areas.

This system is still in place, although some monitoring stations in the regions have beenclosed due to the lack of money. For example, between 1992 and 1996, Hydrometstopped measuring emissions in 4% of cities and closed 4% of its stations (Bezuglaya etal 1998).

In addition to Hydromet, regional departments of the Russian State Committee onEnvironmental Protection (Goscomecologia) are responsible for monitoring industrialfacilities. This monitoring includes atmospheric, soil and water pollution. Sulfur dioxide(SO2), oxides of nitrogen (NOx), carbon monoxide (CO), oxidants (Ox), hydrogensulfides (H2S), hydrofluorides (HF), hydrocarbons, and volatile organic compounds areall considered criteria pollutants.11

Many industrial facilities conduct their own monitoring. All facilities have strict normsfor toxic pollutants and must report results of monitoring to regional branches ofGoscomecologia. Several other agencies also conduct monitoring. For example, theMinistry for Natural Resources conducts hydrological and geological monitoring; theMinistry for Health is responsible for monitoring drinking water and food.

In 1993 the Russian government created a Unified State System for EnvironmentalMonitoring (USSEM) to improve coordination between agencies, collect information inone place, increase the quality of information, and computerize it. USSEM is based on

11 Criteria pollutants are chemicals harmful for human health, for which government agencies have

established maximum permissible levels.

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the existing hierarchical structure adopted by Hydromet. Goscomecologia is responsiblefor coordination of all activities and collection of all information under USSEM. It usesUSSEM to do the following (Ecoline 1998a):

• Coordinate efforts of all agencies responsible for monitoring;

• Collect, control and electronically store all collected data; provide electronicexchange of data between different agencies;

• Create databases for all controlled pollutants; ensure compatibility of these databaseswith international databases;

• Create and publish prognosis about the state of the Russian environment; and

• Provide information to the public on all criteria emissions.

USSEM includes monitoring of anthropogenic sources of pollution and monitoringpollution by chemicals and radioactivity of the environment (e.g. soil, air, and water).Under USSEM provisions to monitor anthropogenic sources, all industrial facilitiesshould establish environmental services, which conduct monitoring of all discharges andprovide information to Goscomecologia. Goscomecologia, in turn, analyzes allinformation, summarizes it, and prepares reports for the State Committee for Statistics(Goscomstat) (Ecoline 1998b).

It is difficult to say if all provisions of USSEM are already in place, but this system isalready being partially implemented. Currently, regional branches of USSEM are beingcreated in several Russian regions. In 1996, 20 regions created information and analyticalcenters and set up databases to create inventories of atmospheric pollutants (Russian StateCommittee on Environmental Protection 1997). Under the rules established byGoscomecologia all power plants must monitor and report SO2 and NOx atmosphericemissions (Eryomin 1999). Goscomecologia has also developed rules and regulations forindustrial facilities. For example, Gazprom facilities must comply with approximately 60regulatory acts (Dedikov 1998).

The current status of USSEM and its future development are unclear. In 1997Goscomecologia planned to continue creating regional branches of USSEM, create betterinformation exchange between regional and federal branches of Goscomecologia, andcontinue integrating USSEM into international monitoring systems (Russian StateCommittee on Environmental Protection 1997).

Environmental statistics collectionBoth Goscomecologia and Goscomstat publish annual statistics on environmentalprotection in Russia. These publications provide information about atmospheric, waterand soil pollution in all sectors. Goscomecologia provides more detailed information

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about pollution from specific industries and provides data about more pollutants thanGoscomstat. For example, Goscomecologia names facilities with the highest level ofpollution in each sector. It also publishes information about the state of the environmentin different regions, but these publications are available only from local branches. Neitheragency provides detailed statistics about discharges from specific facilities. Goscomstatregularly publishes information about the Russian industrial complex in addition topublications about environmental protection. These publications include informationabout energy and fuel consumption by different industries and pollution from industries,but do not provide details about specific facilities.

To collect statistics about atmospheric pollution, local branches of Goscomstat andGoscomecologia require all industrial facilities and power plants, either private or state,to annually fill in a special form about atmospheric pollutants. This information includesdata about CO, SO2, VOC, NOx, and hydrocarbons. In addition to these data, facilities arerequired to provide information about the volume of discharges processed at treatmentfacilities. Besides this form, many facilities create their own inventories andGoscomecologia collects data from these inventories. This information is available to thegeneral public, including environmental organizations. Sometimes Goscomecologiaverifies the legally mandated information. All industrial facilities that use fossil fuels,heat, and energy for production purposes, and all power plants are also required to fill ina form that has questions about all kinds of fossil fuels a facility uses and how muchenergy and heat it consumes. This form also has a question about coke consumption. Thisinformation goes to Goscomstat, to the agency responsible for coordination of thisfacility, and to the Ministry for Fuel and Energy in the case of power plants (CENEF1998). This information is for official use and is not usually available to the generalpublic.

Gazprom Industrial Monitoring SystemBesides USSEM, some industries create their own monitoring systems. For example,Gazprom is creating an Industrial Monitoring System, which will monitor all pollutionsources and discharges into the atmosphere and water. It will have a hierarchical structurewith the main monitoring center in Moscow, three regional monitoring centers, andmonitoring centers at Gazprom facilities. The system will include electronic exchange ofdata between centers, and it will be compatible with USSEM (Yarygin 1998). There areno provisions to monitor GHG emissions in the system. In 1996-1997 this system wasintroduced at an Astrakhan gas processing plant. It allows users to automatically measureSO2, H2S and hydrocarbons and includes a computer center to process and store the data(Koltypin and Petrulevich, 1997). Gazprom is also planning to create a monitoringsystem at compressor stations which will allow it to monitor CO, NOx and NO2 emissions(Akopova and Solovyova 1998).

Neither the USSEM nor monitoring systems adopted by other industries includeprovisions to monitor GHG emissions. However, when a monitoring system is created, itshould be done under USSEM, and Goscomecologia should collect information about all

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emissions through its regional centers. These regional centers will have better data thanfederal agencies about local emission sources. It is very important that data is collectedelectronically by using standardized forms and is stored in one place.

Several regional centers could serve as repositories for local information, and one federalcenter could collect this information from them. It will be impossible to computerize datacollection for all industries immediately, and the transition will take time. However,industries with international ties, such as the steel industry, are already creating electronicsystems for their accounting and financial auditing systems. In these industries, it will beeasier to create an electronic exchange for environmental data. In addition, there are onlya small number of metallurgical facilities in Russia, so it will be relatively easy to equipall of them with computer systems.

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INTERNATIONAL EXPERIENCE WITH MONITORING

No international GHG monitoring system currently exists. Different countries havecreated their own monitoring systems, which include some of the provisions listed abovefor a monitoring system. Some provisions, like continuous emission monitoring, are notrealized in any GHG monitoring systems because of the expense. Measures against non-compliance are not included in these monitoring systems because it is still impossible totransfer credits and there is little control of real emission reductions. Therefore, it isimportant to take a look not only at existing monitoring systems adopted either by theFCCC Secretariat or other countries but also at monitoring systems for other pollutants.These systems have many important features that Russia could imitate. Information onthese monitoring systems, guidelines for creating inventories, and assessment of theirapplicability to Russian conditions is described below:

1. The IPCC guidelines. The guidelines provide clear emission calculation methods,reporting and verifying instructions, and estimations of uncertainties. Using theseguidelines for estimating sectoral emissions will help Russia to have betterinformation about its emissions from different sectors and lay a foundation forcreating monitoring systems for emission trading programs. Currently, Russia onlyhas estimations for CO2 emissions from fossil fuel burning on a country-wide basiswithout desegregating these data between sectors. It has just started to create sectoralinventories. All monitoring provisions recommend calculating emission reductionsbased on estimations of energy saved by applying IPCC default coefficients.

2. Guidelines for monitoring JI projects. All JI projects require monitoring, but nocomprehensive and standardized guidelines for monitoring exist. No countries thatprovide reports about JI projects describe how they conduct monitoring but insteadbriefly explain what will be emission reduction because of a project implementation.Only this year Lawrence Berkeley National Laboratory prepared guidelines formonitoring energy efficiency projects. The guidelines clearly describe techniques thatcan be used to estimate energy saved as a result of a project and then emissionsreduced. They also require verification of monitoring results and clear reportingemission reductions and energy saved. These techniques might be useful formonitoring emission trading programs in the steel sector.

3. European voluntary agreement programs. Experience in monitoring GHGemissions exists in the United States and European Union (EU) countries both forpilot trading programs and JI projects. However, this experience is mostly related tomonitoring individual projects or energy efficiency measures at individual facilities.Also, because emission credits currently cannot be transferred, rules for monitoringare not very strict and verification is almost non-existent. Several voluntaryagreement programs between industries and governments to reduce emissions byimplementing energy efficiency measures were adopted in the United States and

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Europe. They require monitoring and verification of energy saved and emissionsreduced. They cannot be considered emission trading programs but experience gainedby these programs might be useful for the steel sector in Russia, as most projects inthe steel sector will be oriented to improving its energy efficiency.

4. EPA’s Acid Rain Program is the only full-scale emission trading program existingin the United States. It allows U.S. utilities to trade SO2 allowances. It includesprovisions to monitor CO2 emissions but does not require reductions. Currently itappears to be the only program that includes all provisions of a monitoring system.Although its experience is not entirely applicable for future emission tradingprograms, some provisions of the program might be useful.

5. EPA/Gas Research Institute (GRI) study of methane emissions from natural gassystems. Some countries have created methodologies for emission sources, which arenot fully covered by the IPCC. A good example is work done by EPA and the GasResearch Institute to estimate methane emissions from natural gas systems in theUnited States. Using this experience could be helpful for Russia. It is also importantthat EPA has and has had several projects in Russia, including measurements ofmethane emissions; EPA’s experience will be useful for Russia in creatingmonitoring systems in the future.

The following section describes each of these monitoring systems in greater detail.

The IPCC guidelinesIn preparing inventories, Russia should use procedures recommended by the IPCC (IPCC1996). To assist countries in fulfilling their commitments and harmonizingmethodologies to estimate emissions, in 1994 the IPCC published guidelines to estimatenational emissions and report emissions in a transparent and clear way. These guidelinesprovide methodologies for calculating emissions from all sources and provideinstructions for reporting and verifying inventories. There are several methodologies foremission estimates, which allow countries to calculate emissions with different degrees ofthoroughness, depending on the data quality and availability. All FCCC parties arerequired to use these guidelines when they create inventories. Every year, the IPCCworks with experts from different countries to improve methods for calculating andestimating emissions. Currently, the IPCC guidelines are the best source for estimatingemissions, especially from different sectors, and all international organizations use themfor estimating emissions from different countries. The IPCC also sees development ofgood inventories for different sectors as the first step to develop reliable GHG monitoringsystems in countries.

The IPCC guidelines consist of three volumes. The first volume provides an outline ofthe main principles used in the guidelines, step-by-step instructions for compiling anational inventory, reporting forms for sectoral emissions and procedures for measuringuncertainties, and classifies all emission sources. To harmonize estimations of emissions,

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the IPCC divides all emission sources into several categories: the energy complex,industrial processes, solvent and other product use, agriculture, land use change andforestry, and waste. Emissions from each of these sources are divided into smallercategories. For example, emissions from the energy complex are divided into emissionsfrom fuel combustion activities (with separate categories for industrial and fugitiveemissions) and transport. To avoid double counting, there is a clear description of whichemissions should be considered under what sources. For example, the energy categoryshould consider emissions from fossil fuel burning, including industrial processes. Toclassify all emissions sources, the IPCC uses the international standard industrialclassification adopted by the United Nations. Besides emission sources the IPCCprovides classification of fuels. The IPCC provides a reporting table for each emissionsource and summary reporting tables for different sectors. All countries compile and senddata according to these tables. Countries also should provide all supportingdocumentation, descriptions of methods used to estimate emissions, and references to alldata sources. To facilitate a process of emission calculations and reporting, the IPCCprovides software, which includes a program to calculate emissions and all reportingforms. The IPCC also requires estimating uncertainties of emission calculations.

The IPCC pays special attention to managing uncertainties. First of all, the IPCC clearlydefines all source and fuel categories, and all other terminology it uses, and it describesunits and conversion factors. Secondly, it provides methodologies that were agreed uponby many experts from different countries. It also provides a range of uncertainties foremission and activity factors. For example, the overall uncertainty of calculations for CO2

emissions from fuel combustion is 10%, but for methane emissions from oil and gasactivities, it is 60%. For some countries this uncertainty is even greater. The lowest andthe highest estimates for emission factors for the former USSR and Eastern Europe areseveral times different. Such a large uncertainty in estimating methane emissions meansthat if a country reports, for example, 100 tons of CH4 emissions, its actual emissionsmight be either 160 tons or 40 tons. It is evident that for emission trading programs or JIprojects it will be almost impossible to carefully monitor emissions using the IPCC dataand more local measurements should be done.

The second and third volumes describe methods that could be used to calculate emissionsfor different categories and provide default emission and activity factors for each sourcecategory. These methods allow for quick calculations of sectoral CO2 emissions andmight be used to calculate emissions from fuel combustion at single facilities. The IPCCpresents a very simple method for estimating CO2 emissions from fuel combustion:

1. Estimating sectoral fuel consumption for each fuel;

2. Converting to a common energy unit (e.g., a terajoule) by multiplying theconsumption by relevant conversion factor;

3. Multiplying by carbon emission factors;

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4. Calculating carbon stored;

5. Correcting for carbon that is not oxidized; and

6. Converting to CO2 emissions.

This method could be used in monitoring emission trading programs in industrial sectors.It does not require many statistics, and it can be adjusted for individual facilities.Nonetheless, it might still be difficult to obtain reliable statistics for individual facilitiesor even for different sectors. For example, data about fuel consumption at theMetallurgical Combine in Magnitogorsk is confidential (Nikiforov 1999).

Estimates of methane emissions from natural gas systems are not very well developed bythe IPCC because of lack of data about emission factors and very high range ofuncertainties. The IPCC suggests that countries use local data whenever possible. Only afew world regions–the United States and Canada, Eastern Europe and the former SovietUnion, and Western Europe–have emission factors available and provided by the IPCC.Even in these regions, the uncertainties are very large. Specific country emission factorsdo not currently exist. In addition, the IPCC divides emissions from all gas operationsinto three categories: from production/processing, from transmission/distribution, andother leakage. Venting and flaring from oil/gas production is considered separately. Foreach category, emissions are calculated by multiplying an activity factor (the amount ofgas produced or consumed in petajoules) by an emission factor (kg CH4/PJ). The range ofuncertainty for emission factors is enormous. For example, for the former Soviet Unionand Eastern and Central Europe, the emission factor for processing, transmission anddistribution is in the range 288,000 – 628,000 kg CH4/PJ. Clearly, more accurateestimates should be developed for emission trading programs, or it will be impossible toguarantee program credibility.

The IPCC guidelines have several important features that should be used in a futureRussian monitoring system. They accomplish the following:

• Provide simple and rather inexpensive methods to calculate sectoral emissions;

• Require reporting in a clear and transparent way;

• Include estimations of uncertainties;

• Allow electronic calculation and reporting of emissions; and

• Require verification of results by third parties.

All of these features will be essential for Russia. Even simple calculation methods willrequire good sectoral statistics, which often do not exist in Russia. Therefore, Russia

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should start to create inventories in sectors where it is easier to collect the necessary data.The steel sector is a good example. Unfortunately, the IPCC guidelines cannot be used tocreate inventories in the gas sector because reliable information about emission andactivity factors does not exist for Russia. Russian agencies should conduct this work ontheir own or work in conjunction with other countries who have this experience.

EPA’s Guidelines for Monitoring, Evaluation, Reporting, Verification andCertification of Energy-Efficiency Projects for Climate Change MitigationThese guidelines were prepared as a part of a three-phase EPA project to create usableguidelines for monitoring JI projects (Vine and Sathaye 1999). During the first phase, anoverview of all existing protocols to estimate energy savings was prepared. Developingthe guidelines was the second phase of the project. During the third stage, a proceduralhandbook will be prepared that describes how the guidelines can be implemented inpractice.

The main goal of these guidelines is to provide initial methodologies for emissionreduction estimations as a result of joint implementation projects and assist participants inreporting and verifying energy efficiency projects. These guidelines also have a goal tostandardize approaches for monitoring, provide a clear way of reporting of emissionreductions and help to reduce monitoring cost. The guidelines develop standard forms forreporting which are based on a Uniform Reporting Format (URF) approved by the FCCCSecretariat for reporting JI projects.

Although these guidelines cannot fully be used for monitoring emission tradingprograms, they provide a good overview of existing methods to measure energy savingsadopted by many energy efficiency programs in the United States and provide manypractical examples of how these methods were used. The guidelines also incorporatemethodologies used in many existing protocols adopted by both American agencies andcompanies − EPA, the Department of Energy (DOE), the U.S. Initiative on JointImplementation (USIJI), Californian utilities − and international multilateral agencies(World Bank, Global Environmental Fund) for evaluating energy efficiency programs.These guidelines also help to emphasize the difference between monitoring JI projectsand monitoring emission trading programs. It is suggested that the guidelines might beused for monitoring end-use energy efficiency projects both in the residential andindustrial sectors.

The guidelines suggest calculating emissions by multiplying amount of energy saved bydefault emission factors suggested by the IPCC. Therefore, the main emphasis of theguidelines is how to calculate energy savings as a result of project implementation.Several methods are suggested for calculating energy use:12

12 These methods are largely based on the methodology suggested by the International

Performance Measurement and Verification Protocol (IPMVP). The IPMVP was adopted by DOE toestimate energy savings from implementing energy efficiency projects. Many countries now use the

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• Engineering methods. Allow calculation of energy savings based on technicalinformation from equipment manufacturers. These methods might be used formonitoring buildings and groups of buildings. They are most useful whenimplementing with other methods.

• Statistical methods. Include comparison of energy consumption before and after theimplementation of energy efficiency measures by analyzing energy bills. Statisticalmethods are better when implemented for groups of buildings. They are relativelyinexpensive and easy to explain, but assumptions need to be confirmed with surveydata.

• Measuring methods. Allow measuring energy consumption by end-use metering.These are the most accurate methods for measuring energy use both in individualbuildings and groups of buildings but not very useful for data analysis. They can bevery costly and require using special equipment.

For each method, the guidelines provide information on which energy efficiencyimprovements are most suitable and provide practical examples from different agencies.However, the guidelines mostly give examples for monitoring energy efficiencyimprovements in the residential sector. Improvements in the industrial sector are almostleft untreated. In the future, it would be useful to extend these guidelines by providingmore information about industrial projects. New guidelines could also be designed for thenatural gas sector.

Because the guidelines were prepared for monitoring JI projects, they pay specialattention to estimating the additionality of a project. This includes careful estimation of aproject baseline and then re-estimation of the baseline during project implementation.Results of estimation and re-estimation should be carefully reported by using specialformats. This part will not be necessary in emission trading programs.

The guidelines require reporting of energy savings and emissions reduced by usingstandard forms that are compatible with URF. The guidelines also require providingestimations of uncertainties. It is also required that project participants report descriptionof methods they use to calculate emission reductions and energy saved and providequality assessment of these methods.

The guidelines also require verification of energy saved and emissions reduced by a thirdparty. Verifiers should check all information provided by participants and report it to theFCCC Secretariat.

protocol for evaluating their projects. The paper does not discuss the IPMVP in greater detail because itwas not designed for estimating GHG reductions.

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Although the guidelines cannot be fully used to monitor emission trading programs, theyinclude four important provisions: 1) transparency, 2) verification of results by a thirdparty, 3) careful reporting using a standardized format, and 4) estimation of uncertainties.These features will be essential for a future Russian monitoring system.

Voluntary Agreements in EuropeVoluntary agreements between industries and governments for reducing CO2 emissionsby implementing energy efficiency measures have been adopted in many EU countries.Although voluntary agreements in different countries have different provisions, they alsohave many common features regarding requirements for monitoring and coveringparticipating industries. This section is based on an article prepared for the EuropeanUnion (Chidiak 1999), which provides an excellent overview of voluntary agreements infive European countries.

Voluntary agreements were first adopted in 1990 in Europe, and they have beenrenegotiated on a regular basis since. The agreements were formulated as an attempt tointroduce a new policy instrument to reduce CO2 emissions cheaply and improve energyefficiency in industry. Initially, member countries proposed a carbon tax, but because ofresistance from industry it was decided to exempt industries from this tax in Sweden, theNetherlands and France. Denmark introduced a carbon tax, but industries participating involuntary agreements were taxed at a reduced rate.

All voluntary agreements involve an agreement between a government and an industrialsector or a company to improve energy efficiency and as a result stabilize or reduce CO2

emissions during certain period of time. In Denmark, Germany and France this agreementcovers only energy intensive branches; in other countries all industries may participate inan agreement. Commitments are set either on a branch level (Germany) or a firm level(Sweden, Denmark) or both (the Netherlands, France). Voluntary agreement parametersmight be a subject of negotiations between a government and industries as it was inFrance and Germany, where a timetable, goals of the voluntary agreement, and coverageof industries were negotiated, or might be preset by a government, as it was in Denmarkand Sweden. For example, in Denmark a firm signing an agreement should undertakeenergy efficiency improvements, conduct an energy audit (undertaken by a third party atthe firm’s expense), and regularly report progress. In exchange a company receives a bigreduction in the carbon tax rate.

Regarding monitoring and verifying emissions, in most cases governments rely on firms’self-reporting. In the German case, individual firms report progress to their branchassociations, which in turn provide information to an independent institute responsible forverification. Similarly, in France each individual firm reports to a steering committee andthen the steering committee assesses progress made. In Denmark and Sweden, a firm’scommitments include self-reporting of progress without monitoring and verificationprovisions. Only in the Netherlands do local authorities conduct periodic reviews in theframework of the permitting system that reinforces monitoring and verification, although

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evaluation of a company’s progress, by a collective governmental panel and industryrepresentatives, is based on firms’ self-reporting.

Regardless of the fact that in some cases commitments are set up on a sectoral level,monitoring is conducted at the firm level. When the Kyoto Protocol is ratified,requirements for monitoring and verification likely will be even stricter. Even ifmonitoring is conducted by companies, verification will be done by third parties.

Voluntary agreements have been successful in Europe. For example, in the Netherlands itwas estimated that 25–45% of the achieved energy efficiency improvements between1995 and 1998 were attributable to these agreements, and they were more cost effectivethan other regulation schemes.

Voluntary agreements might work in Russia; the steel sector is suitable for them becauseit is very inefficient and energy efficiency improvements might be done cheaply. Thesteel sector is one of the sectors that is still economically active in Russia. Steelmanufacturers are interested in expanding their markets in the future and introducing newtechnologies. Voluntary agreements in most European countries cover energy intensivesectors, including the steel industry. It makes sense to start with one sector in thebeginning because it will be difficult to work with many sectors at the same time, takinginto account the large number of industries. There are relatively few steel facilities inRussia and it will be easy to cover most of them.

But in the case of Russia, several considerations should be taken into account. In Europeindustrial companies have a strong incentive to increase energy efficiency becauseotherwise they pay a carbon tax. In Russia a carbon tax doesn’t exist and cannot be anincentive to reduce emissions. Emissions in Russia, including industrial emissions, havedropped substantially. Therefore companies have few incentives to decrease them further.At the same time by implementing energy efficiency measures the steel sector cansubstantially decrease its energy expenses that represent a big part of its production cost.The Russian government would probably sign an agreement with the sector and promisea tax break if it implements energy efficiency measures.

Voluntary agreements could serve as an important first step in creating a pilot emissiontrading program between facilities. Facilities will have an incentive to further decreaseemissions and get more credits when it will be possible to transfer credits. A specialcommittee with representatives from the industry and the government could be created tocollect information from facilities about their emissions. Goscomecologia or Hydrometcould verify the implementation of these agreements.

Environmental Protection Agency’s Acid Rain ProgramEPA’s Acid Rain Program, which is designed to decrease SO2 and NOx emissions frompower plants and large industrial sources by trading emission allowances, is the only full-scale emission trading program in existence. It requires continuous monitoring of

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emissions and sets up clear rules for allocation, issuing and trading emission allowances.The program also requires careful tracking of all issued allowances through an electronicsystem. The program does not require reductions in CO2 emissions, but it has provisionsfor monitoring these emissions. Currently, the program covers only power plants, whichbelong to energy utilities, but it also allows industrial facilities to participate voluntarily.

The Acid Rain Program is based on Title IV of the Clean Air Act, which requiresreducing annual SO2 emissions by 10 million tons below the 1980 level. To achieve thisgoal the Clean Air Act establishes a two-phase tightening of the restrictions placed onfossil fuel burning by power plants (EPA 1998).

Phase I started in 1995 and included 445 units of mostly coal burning plants located ineastern and mid-western states. During this phase, emissions were decreased by almost40% below the required level.

Phase II will start in 2000 and will tighten the emission reduction goal imposed on theseplants. It also will set restrictions on smaller coal, oil and natural gas fueled plants. PhaseII of the program will affect all existing units with a capacity of more than 25 megawattsand all new utility units. The total number of units included will be more than 2,000.

The Clean Air Act also requires reducing NOx emissions by 2 million tons by the year2000. A substantial portion of this reduction will be achieved by coal-fired utility boilersthat will be required to implement more modern technologies to meet new NOx standards.

To achieve emission reductions cheaply, the Acid Rain Program introduced a market-based mechanism that allows affected units to obtain emission allowances. Under thisprovision each unit was allocated allowances based on its historic fuel consumption leveland a specific emission rate. Each allowance permits a unit to emit 1 ton of SO2 during orafter a specified year. For each ton emitted in a given year, one allowance is retired orcannot be used again in that year. Allowances can be bought, sold or banked.13 Anyorganization or individual can participate in trading. However, regardless of the numberof allowances a unit has, it cannot emit at levels that violate federal or state limits setunder Title I of the Clean Air Act (EPA 1998).

To control the number of allowances issued, EPA created a special electronic AllowanceTracking System (ATS), which tracks all allowance transactions. Any unit interested inparticipating in emission trading may open an ATS account by submitting an applicationto EPA. The account contains information on the number of allowances held by a unit,account representatives (who must be appointed by each trading party), and serialnumbers of allowances. ATS is computerized to facilitate the data flow and have morereliable accounting of allowances (EPA 1998).

13 A power plant that emits less than its emission objectives and doesn’t sell its surplus allowances

can use them in the next commitment period.

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To encourage additional sources of SO2 emissions to join the program, the Clean Air Actestablished the Opt-In Program. This program allows industrial facilities to enter the AcidRain Program voluntarily, reduce their emissions, get their own allowances andparticipate in trading. It was estimated that the participation of additional units wouldreduce the cost of emission reduction (EPA 1998). In 1997, 160 units joined the programvoluntarily.14

To make the Acid Rain Program credible, EPA requires all units to conduct continuousemission monitoring (CEM) of SO2, NOx and CO2 emissions and report results to EPA.Monitoring rules are strictly set. There are provisions for initial equipment certificationprocess, quality assurance and quality control procedures, and keeping records andreporting. EPA also provides rules for calculating emissions for periods of missing data.Emissions are reported on an hourly basis in tons and sent through the Emission TrackingSystem to EPA. Then EPA compares the results of monitoring with the number ofallowances the facilities have and decides if they are in compliance. If a unit’s emissionsexceed the number of allowances it has, it pays a penalty of $2,000 per excess ton of SO2

or NOx emissions. In addition violating units are to offset excess SO2 emissions withallowances in an amount equivalent to the excess (EPA 1998).

Monitoring emissions, reporting results, and careful verifying of emissions are the mostcrucial components of the Acid Rain Program because they provide the systemcredibility. It is useful to have a closer look at monitoring requirements.

All units over 25 megawatts and new units under 25 megawatts that use fuel with a sulfurcontent greater than 0.05% are required to measure and report emissions under theprogram. The following equipment should be installed:

1. SO2 pollutant monitor;

2. NOx pollutant monitor;

3. Diluent gas (O2 or CO2) monitor; and

4. Computer-based data acquisition and handling system for recording and makingcalculations.

The current rules do not require using CEM to monitor CO2 emissions, but if utilitiesdecide to do so, the CO2 monitor allows calculating emissions in tons per hour. All unitsshould install a data acquisition and handling system for reporting. All equipment shouldbe in continuous operation and record data every 15 minutes. EPA must certify all

14 Terry Keating, Office of Air & Radiation, the U.S. Environmental Protection Agency, personal

communication, July 27, 1999

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equipment before units can use it. All units should submit to EPA monitoring plans andhourly emission data in a standard electronic format available from EPA (EPA 1998).

Another important feature of the program is that all information concerning rules, dataabout emissions, and number of traded allowances is available from EPA’s website.Anyone with access to the Internet can view the information (http://www.epa.gov/acidrain).

The Acid Rain Program is the most developed and highly credible emission tradingprogram in use today. It includes all features of an ideal monitoring system. It cannot befully used for emission trading programs because in most cases it is impossible tomeasure emissions − they are instead calculated from fuel consumption. Even if it ispossible to monitor emissions, many industrial facilities have too many emission sources,which is especially the case for metallurgical plants, and it would be too costly to monitorall of them. However, electronic tracking of allowances can be used in any emissiontrading program. It is impossible under current conditions in Russia to develop anelectronic system, at least in the next five years. At the same time, however, manyindustrial facilities already use modern computer systems, and these can serve as afoundation for future electronic systems. It is also important to have informationavailable in a single place that is accessible to the public.

The Acid Rain Program is also important in that it creates an incentive for utilities toparticipate. It is cheaper for companies to set up a monitoring system and hold enoughallowances to cover their emissions than to break rules and pay fines. The opportunity totrade allowances gives participants an incentive to cut emissions further by implementingadditional measures and selling their excess allowances.

EPA/Gas Research Institute StudyFrom 1991 to 1996, EPA and GRI conducted a comprehensive study of methaneemissions from the U.S. natural gas sector (EPA/GRI 1996). The main goal of the studywas to estimate methane emissions from the whole natural gas sector for the base year of1992 with an overall accuracy goal of 0.5% of natural gas production based on a 90%confidence level. The study also has a goal to support the IPCC strategy for fuelswitching from coal and oil to natural gas. As a result of this study, emission and activityfactors were calculated for all segments of the gas industry: production, processing,transmission (including storage), and distribution. The study identified approximately100 components of natural gas systems, which are sources of methane emissions. Foreach component the study developed an emission factor. The study reached its goal inestimating baseline emissions and proved the IPCC strategy of fuel switching. Inaddition, results from the study are being used by the natural gas companies to reduceoperating costs while reducing methane emissions.

Although not all methods and techniques developed by this study might be used byGazprom, the general methodology can be applied for estimating methane emissionsfrom the natural gas systems in Russia. It is also important to emphasize that in Russia’s

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case it will be easier to estimate emissions because there is only one company responsiblefor all natural gas operations. For example, in Russia there are only 14 gas transportationcompanies and they all belong to Gazprom, whereas in the United States there are severalhundred independent companies responsible for natural gas distribution andtransportation. Gazprom also uses more standard equipment. For example, 70% ofcompressor stations use the same three types of gas compressors (Dedikov 1998).

The methodology used in the study consisted of several steps. In the first step, EPA/GRIcharacterized the natural gas sector by breaking it into four segments (production,processing, transmission, and storage and distribution). Special attention was paid toexclude methane emissions from gas produced by oil wells. It was done to set a clearborder between the oil and gas industries and avoid double counting. For each segment ofthe sector, the study identified all methane emission sources. For example, for thetransmission sector more than nine components were defined. For each segment and eachcomponent the study produced a worksheet with estimations of emission and activityfactors. Emissions were estimated for the whole segment and each component within thesegment on the country scale. The study also estimated a range of uncertainty for eachsource of emissions.

In the second step, all sources were characterized as steady or unsteady emitters.EPA/GRI defined unsteady emitters as emitters with highly variable emissions, such aspneumatic devices or a maintenance activity that requires blowdown. Steady emitterswere defined as emitters with a relatively constant rate of methane leaks. All emissionswere characterized as fugitive, vented or combusted. The study also classified emissionsin accordance to the time they occur: startup, normal operations, maintenance, upsets andmishaps emissions. After all emissions were classified, steady emissions were estimatedby measuring emissions from different components. Different measurement techniqueswere used for different components. Emissions from a large number of components weremeasured and an average emission factor per component defined for each componenttype. Unsteady emissions were calculated or, in a case of maintenance emissions,calculations were taken from companies.

In the third step of the study, emission and activity factors were estimated. Because datawere collected for a small percentage of sources, these data were extrapolated to obtainnationwide estimates of emissions.

EPA/GRI gave special attention to estimating the accuracy of the overall emission rate.By implementing different statistical methods the study estimated the accuracy ofemissions calculated as ± 0.5% of gross natural gas production for the 90% upperconfidence bound of the annual national emission rate. This was equivalent to an absoluteaccuracy target of approximately ± 111 billion standard cubic feet. For an estimated 307billion standard cubic feet, this translates into a range of uncertainty of ± 33%.

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The study also identified a range of uncertainty of emission calculations for each segmentof the natural gas sector. The smallest range of 52% was for compressor stations.15 Forsome segments, such as metering and control stations at transmission pipelines, the rangeof uncertainty was several hundred percent.

The methodology suggested by EPA/GRI might be very useful in estimating emissionsfrom Gazprom. Specific estimates are important, because the existing IPCC methodologydoes not provide good techniques for estimating methane emissions and doesn’t havegood information on activity and emission factors. The emission and activity factors forRussia are largely unknown. In fact, it will be easier to implement this methodology andto collect data in Russia, because the Russian natural gas sector is less diverse than theAmerican. In addition, EPA has already made several measurements at compressorstations in Russia. Initially, it would make the most sense to cover not the whole sector,but segments producing the largest share of emissions where the range of uncertainty israther small.

15 It is possible that the overall uncertainty for the whole system is lower than uncertainties for

different components. Sophisticated statistical methods can decrease the overall uncertainty of data.

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POLICY RECOMMENDATIONS

Russia is at a good starting point for creating a monitoring system for GHG emissionsand sectoral inventories. It has institutions responsible for monitoring in place and iscreating a monitoring system for other air pollutants, which can be extended to includeGHGs. No global GHG emission monitoring system is currently in place, but someexperience with monitoring already exists on both domestic and international levels.Russia could use this experience to speed the design of its future system. Internationalbodies have already designed guidelines for GHG inventories, and Russia should usethem. Several recommendations both for creating inventories and designing a systemmight be useful for Russia:

1. Use standard IPCC guidelines to the extent possible. Russia should createinventories for sectoral emissions. The IPCC provides different methodologies tocalculate emissions. In Russia it is important to start with simple methods. It is usefulto begin with sectors that have the biggest share of emissions or have limited sourcesof emissions. The steel sector is one example. It produces the largest share ofindustrial CO2 emissions. There are not many facilities and it will be easier to coverall of them. In the future, when initial information about emissions are collected andthe biggest sources identified, it will be possible to use more rigorous and expensivemethods for calculating emissions especially for these sources.

2. Use methodologies accepted by other countries for sectors not covered by theIPCC. For some categories, the IPCC does not provide well-defined techniques. Thenatural gas sector is one example. The IPCC does not provide reliable informationabout emission and activity factors for Russia. To create a reliable inventory Russiamight draw from American experience. EPA already has experience in conductingprojects with Gazprom and is willing to cooperate in the future. It will be tooexpensive to cover the whole natural gas sector at the beginning and it makes sense tostart with a segment that produces the biggest share of emissions. Transmissionpipelines and compressor stations are a good place to start.

3. Improve data collection methods. Although the IPCC guidelines provide simplemethods, they require using a facility level statistics. These statistics should becarefully collected and published by regional Goscomstat and Goscomecologiabranches.

4. Improve coordination between regional ministries. Several ministries areresponsible for collecting statistics on a regional level. Both Goscomecologia andGoscomstat collect data about air pollution. The Ministry for Fuel and Energy andGoscomstat compile information about fuel consumption. One ministry should beresponsible for storing all collected information.

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5. Increase quality of reporting. All reporting should be done using standard formssuggested by international bodies. This will increase the transparency of the systemand facilitate data collection. Electronic reporting helps to facilitate data exchangebetween users and to standardize information. It will be difficult to computerize datacollection and reporting for all sectors at the same time but it should be possible forsome sectors. For example, many steel factories already use computers for managingfinancial information. All information should be collected in one place. Electronicreporting also facilitates the process of verification. If all information is presented in astandard format and data collection methods are clearly described for verifiers, it willbe easier to check this information.

6. Increase the transparency of monitoring. Information about emissions should beavailable for all interested parties. Ultimately, this could be done through a websitewhere all information is readily available.

7. Include verification of monitoring. Results of monitoring should be verified by athird party. Monitoring might be conducted by facilities, which submit information toGoscomecologia or to a special center created for data collection. International bodiesor independent Russian agency should do the verification.

8. Create incentives for monitoring. It is important that facilities have incentives tomonitor. Both EPA’s Acid Rain Program and Voluntary Agreements in Europe aresuccessful because participating entities have incentives to monitor and submitreliable information. In EPA’s program, utilities can benefit from implementingadditional measures to limit SO2 emissions because they can sell more allowances.Under Voluntary Agreements, facilities that implement energy efficiency measuresare exempted from the carbon tax. In Russia, signing a voluntary agreement betweenthe steel industry and the government may be a first step in establishing a pilotemission trading program. Although emissions have already been reduced in Russia,reducing them further facilities will generate more credits. It is important that theRussian government allows industries to take part in emission trading for this reason.

9. Design guidelines with a varying levels of detail. It is important that guidelines formonitoring are not too complicated and do not take too much time to follow. Itmakes sense to create more complicated guidelines for JI projects when it isnecessary to estimate and re-estimate baselines. Guidelines should be simpler foremission trading programs. It is also important for Russia that guidelines are not veryexpensive to follow. Reporting about emission reductions should not be verycomplicated. It will be a trade-off between credibility of a system for which it isimportant to have as much information as possible and cost-effectiveness of a system.Starting with simple methods at the beginning and then implementing more preciseand complicated methods may be a solution to this problem. If companies spend toomuch time on monitoring, verification, and reporting, they will be less willing toparticipate in any flexible mechanisms.

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10. Provide information about monitoring for JI projects. This recommendation isrelevant not only for Russia but all FCCC parties. Currently, the FCCC reports aboutJI projects do not include information about monitoring. It is highly recommendedthat such information be included and available to all interested parties. Theavailability of such information helps to better estimate emission reductions due toproject implementation and therefore increases the credibility of climate changemitigation through JI projects.

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CONCLUSIONS

Russia must create a GHG emission monitoring system and inventories for differentsectors in order to be eligible for participation in flexible mechanisms. As the findings ofthis study indicate, this is a challenging though feasible task.

Guidelines for creating inventories were developed by the IPCC and Russia shouldfollow them. They allow users to calculate emissions from all sources and have severalimportant features:

• Provide simple methods to calculate sectoral emissions;

• Require reporting in a transparent way;

• Include estimations of uncertainties; and

• Require verification of results.

All of these features are essential for Russia. Russia still lacks sectoral inventories, and itmust create them. Existing guidelines provide Russia with techniques to do this. Startingwith the steel sector will be relatively easy for Russia because there are only a fewfacilities and it will not be extremely difficult to collect necessary data. By covering thesteel sector, Russia also will be covering a significant part of its industrial emissions.

The IPCC guidelines do not provide well-defined methods for calculating methaneemissions from the natural gas sector. EPA and GRI have completed a comprehensivestudy on identifying emission sources and estimating emissions from the U.S. natural gassector. Using the methodology of these institutions, Russia could create a thoroughinventory of methane emissions.

A monitoring system for GHGs does not currently exist in Russia. Therefore, Russia maywant to adapt monitoring systems adopted in other countries or recommended byinternational bodies under the FCCC. American agencies are developing monitoringsystems for flexible mechanisms for the FCCC. Recently, EPA has developed guidelinesfor monitoring energy efficiency projects. Rules for monitoring emission tradingprograms do not yet exist because this is a new and untested mechanism. Althoughmonitoring schemes for JI projects and emission trading programs will be different, somefeatures will be similar, such as transparency, verification of results, clear reporting; andmeasurement of uncertainties. All these features will be crucial for the credibility of aRussian system.

Currently, GHG monitoring does not include provisions for noncompliance because it isstill impossible to transfer emission reduction credits. It also does not require measuring

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emissions. To understand how these provisions might be included into a futuremonitoring system it is useful to look at the full-scale SO2 emission trading programdesigned by EPA. This program requires continuous emission monitoring, includingvoluntary measurement of CO2 emissions. It also requires electronic tracking ofallowances and includes strict rules for noncompliance. These last features will beextremely important for the credibility of future Russian emission trading programs.

Russia already has a monitoring system for other substances. The Unified State Systemfor Environmental Monitoring was created in Russia in 1993. This system shouldcoordinate efforts of all agencies responsible for monitoring and provide electroniccollection of data. It has a hierarchical structure with regional centers. There is oneagency – Goscomecologia – that is responsible for collecting and storing all data. Thissystem does not have provisions to monitor GHG emissions, but it should definitely beconsidered for this purpose.

In summary, Russia is capable of constructing a reliable monitoring system. It will not bean easy task, and it will require a great deal of effort, but the basis for this system alreadyexists within Russia’s borders.

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REFERENCES

Akopova, G. and Solovyova, N. 1998. A Control System for Toxic Discharges atCompressor Stations, Proceedings of the Second International EnvironmentalRuhrgas – Gazprom Workshop, held in N. Novgorod on October 27-29, 1997.Gazprom, Moscow. In Russian.

Baron, R. 1999. An Assessment of Liability Rules for International GHG EmissionsTrading. IEA Information Paper. International Energy Agency, Paris, October 1999. (Alsoavailable on the Internet: http://www.iea.org/clim/cop5/pubs/assess.pdf)

Bezuglaya, E., Chicherin, S., Sharikova, O. 1998. Current Status and FuturePerspectives of the State Network for Monitoring Atmospheric Pollution inRussian cities. Monitoring Atmospheric Pollution in Russian cities. Collection ofpapers. Russian Federal Service for Hydrometeorogy and EnvironmentalMonitoring. Sankt Petersburg. In Russian.

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ADDITIONAL BIBLIOGRAPHY

Bureau of Economic Analysis. 1998. Study on Russian National Strategy ofGreenhouse Gas Emission Reduction. Ministry of Economy of the RussianFederation, Moscow.

Center for Clean Air Policy. 1998. Methods for Ensuring Compliance in anInternational Greenhouse Gas Trading System: Summary of Key Points.Washington, D.C.

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Ministry for Fuel and Energy of the Russian Federation. 1998. Kyoto Protocoland Russian Energy. Institute of Energy Strategy, Moscow.